Tuesday, July 31, 2012

Cities
are considering a housing solution that makes investors furious - (www.businessinsider.com) In the foreclosure-battered inland stretches of
California, local government officials desperate for change are weighing a
controversial but inventive way to fix troubled mortgages: Condemn them. Officials
from San Bernardino County and two of its cities have formed a local agency to
consider the plan. But investors who stand to lose money on their mortgage
investments have been quick to register their displeasure. Discussion of the
idea is taking place in one of the epicenters of the housing crisis, a working-class
region east of Los Angeles where housing prices have plummeted. Last week
brought another sharp reminder of the crisis when the 210,000-strong city of
San Bernardino, struggling after shrunken home prices walloped local tax
revenues, announced it would seek bankruptcy protection.

Analysis: Banks behave badly redux: Is it killing confidence?
- (www.reuters.com) It wasn't supposed to be like
this. After the worst financial crisis since the Great Depression almost took
the global economy over a cliff, tough new regulations and stronger internal
controls at the world's major banks were meant to help restore confidence in
the financial system. But recent headlines have some top investors and
strategists questioning whether there has been any progress at all. The horror
stories include the deepening scandal that big banks rigged Libor, the
benchmark international lending rate; JPMorgan Chase's (JPM.N) mounting losses from disastrous
credit bets and a possible cover-up attempt; and the disappearance of customer
funds from Iowa futures
broker PFGBest, discovered after its founder tried to commit suicide and left a
note outlining a 20-year fraud.

JPMorgan Blaming Marks On Traders Baffles Ex-Employees - (www.bloomberg.com) JPMorgan Chase & Co. (JPM)’s assertion
that traders at its London chief investment office may have intentionally
mismarked trades, masking losses that total at least $5.8 billion, makes little
sense, according to former executives with direct knowledge of the unit’s
operation. The bank restated first-quarter results, paring profit by $459
million, in part because an internal review revealed that U.K. traders had
priced their books “aggressively,” Mike Cavanagh, head of Treasury &
Securities Services, said in a July 13 meeting with analysts. The mispricing
made losses on a portfolio of credit derivatives look smaller than they were,
and executives concluded that traders may have sought to hide the “full amount
of losses,” JPMorgan said in a presentation. JPMorgan
requires traders to mark their positions daily so the firm can track their
profits, losses and risk. An internal
control group double-checks the marks against market prices monthly and at the
end of each quarter, said three former executives from the CIO and a senior
executive in market risk. The firm uses the control group’s prices, not what
individual traders submit, to calculate earnings, making it difficult for one
trader or trading desk to rig prices, the people said.

Worst-in-Generation Drought Dims U.S. Farm Economy Hopes -
(www.bloomberg.com) A worst-in-a-generation drought
from Indiana to Arkansas to California is damaging crops, rural economies, and
threatening to drive food prices to record levels. Agriculture, though a small
part of the $15.5 trillion U.S. economy, had been one of the most resilient
industries in the past three years as the country struggled to recover from the
recession. “It might be a $50 billion event for the economy as it blends into
everything over the next four quarters,” said Michael
Swanson, agricultural economist at Wells Fargo & Co. (WFC) in Minneapolis,
the largest commercial agriculture lender. “Instead of retreating from record
highs, food prices will
advance.” The U.S. Department of Agriculturedeclared July
11 that more than 1,000 counties in 26 states are natural-disaster areas, the
biggest such declaration ever. The designation makes farmers and ranchers in
affected counties -- about a third of those in the entire country -- eligible
for low-interest loans to help manage the drought, wildfires or other disasters.

German Court Won’t Rule on Bailout for 8 Weeks in Delay for
Fund - (www.bloomberg.com) Germany’s
top court will take more than eight weeks to decide whether to suspend the
euro-area’s permanent bailout fund, leaving Europe’s
anti-crisis coffer less than half full to respond to the debt crisis. The Federal Constitutional Court in
Karlsruhe will issue a ruling on bids to halt Germany’s participation in the
European Stability Mechanism and the fiscal pact on Sept. 12, it said today in
an e-mailed statement. That’s more than two months after it held a hearing on
the measures. “The court has held a
comprehensive hearing on the issue and will now take the time it needs to reach
a decision,” German government spokesman Steffen Seibert told reporters in
Berlin today. Finance Minister Wolfgang
Schaeuble warned the hearing last week that a delay in
activating the ESM “could lead to a significant worsening” of the crisis.

Monday, July 30, 2012

Every
Money Professional Knew Libor Was A Scam – (www.businessinsider.com) They've known it for 30
years. The only thing interesting about
this story is that it’s 30++ years old.People have been sandbagging Libor
quotes since the concept of Libor was originated. I don’t believe that
there is a money pro on either the buy or sell side over the past thirty years
who didn’t understand that the Libor Fixing was “fixed”. If they claim to be
“shocked” today, they are either lying or stupid. The same goes for every
central banker and treasury official that knows the way to the bathroom. As
far as any consumers who took out a Libor based loan are concerned; they have
no claim at all. If Libor hadn’t been “fixed” all these years they would have
paid substantially more on those loans. Libor has always been jimmied down, not
up. The world has been looking for an excuse to hang some bankers (and a few
regulators). Liborgate looks like it could be the opportunity for the
bloodletting. I’m convinced that this is the wrong issue to bring out the
nooses.

Social Security Hole Overwhelms Taxes, Cuts - (www.bloomberg.com) Now that health care is off
the front burner, it’s time to fix Social Security. Social Security’s trustees
say the system needs only “modest changes.” In fact, the system is desperately
broke. The proof is buried deep in the trustees’ own 2012 report in a complex
table, numbered IV.B6. The
system’s actuaries prepare the report’s tables. But what the trustees make
of them is up to the trustees. Clearly this year, as in others, the
trustees ignored table IV.B6. How else could they have come up with their
blase statement that Congress should address Social Security’s finances “in a
timely way”? Table IV.B6 is a long-run balance sheet for Social
Security. It shows that the system’s $88.9 trillion in liabilities exceed
its $68.4 trillion in assets by $20.5 trillion. The liabilities are the present
value of the system’s projected benefit payments, whereas the assets are the
system’s $2.7 trillion trust fund plus $65.7 trillion in
projected taxes, also valued in the present. The $20.5 trillion fiscal gap
separating Social Security’s liabilities and assets -- its unfunded
liability -- is enormous; it is 1.4 times U.S. gross domestic product and
34 times annual Social Security taxes.

The Worst Banking Scandal Yet? - (www.bloomberg.com) The scandal over the
manipulation of Libor has the potential to become one of the most costly and
consequential in the history of banking. If the financial institutions involved
want to prevent it from overwhelming their businesses and damaging the broader
economy, they’ll have to act fast. Investigators in the U.S., Canada, Europe and Asia are
piecing together a breathtaking portrait of avarice and deceit. To hide their
institutions’ problems during the financial crisis, or often to boost their
traders’ profits, bankers knowingly submitted false data for the calculation of the London Interbank Offered Rate, a
benchmark interest rate that influences the
value of hundreds of trillions of dollars in financial contracts around the
world, including floating-rate mortgages, corporate loans and interest-rate swaps. The roughly $450
million in fines paid by Barclays Plc, the first bank to fess up, is only the
beginning. Regulators can and should hit more banks with large fines to prevent
a repeat. More important, criminal charges for the first time could threaten a
significant number of bankers and traders with jail terms for their actions
during the financial crisis -- a much needed comeuppance that could help reset
the industry’s moral compass.

Insight: The curious case of Iowa broker's Romanian property
empire - (www.reuters.com) Russell Wasendorf Sr., the
founder of failed Iowa brokerage PFGBest, had risky investments a long way from
the Midwest markets where he built his name. More than a decade before he
allegedly began hiding more than $200 million of misappropriated client money
in a scheme that unraveled this week, Wasendorf joined three other Chicago
traders as founding investors in one of Romania's largest real estate
development groups, Avrig 35 Group, which was valued at more than $1 billion at
its height in 2007. But since 2007 the paper value of his holdings has crashed
from around $150 million to less than $45 million, as Avrig has written down
investments. As Avrig's complex web of dozens of firms struggles to trade its
way out of difficulties, Alexander Hergan, Wasendorf's Romanian-born business
partner and a former options trader and founding member of the Chicago Board of
Options Exchange (CBOE), hopes the drama in Iowa doesn't upset the firm's
recovery.

Spain Threatens Deficit-Troubled Regions, Offers Help - (www.bloomberg.com) Spain’s
government threatened to take control of budgets in regions that fail to meet
austerity targets, while offering financing to help them avoid default as the
nation battles to restore investor confidence. Regions projected to miss
deficit goals this year were given a week to take action or risk intervention,
Budget Minister Cristobal Montoro said in Madrid late yesterday after meeting
regional finance chiefs. Local officials, including some from the ruling People’s
Party, resisted his demands. “This proposal has more show than go,”
said Michael Derks, chief strategist at FxPro Group Ltd. in London.
“Spain isn’t in any position to take on more obligations and this isn’t going
to repair the credibility of regional governments that have been shut out of
markets for a considerable time.”

Sunday, July 29, 2012

Peregrine Customers’ Claims Priced at 25 Cents on Dollar - (www.bloomberg.com)
Customers’ claims on
Peregrine Financial Group Inc., whose founder is accused by regulators of
misappropriating more than $200 million, may fetch less than a quarter of their
value in the wake of the firm’s bankruptcy, a trader said. Quotes of 22 cents
on the dollar to 25 cents were given today to half a dozen Peregrine customers
who called CRT Capital Group LLC, which buys and sells distressed debt, said Joseph
Sarachek, managing director of claims trading. By comparison, U.S.
commodity customers of bankrupt MF Global (MFGLQ) Inc. have always
been able to sell their claims in the high 70s, he said. Peregrine filed for
bankruptcy July 10 after the U.S. Commodity Futures Trading Commission sued the
brokerage alleging the firm and its founder, Russell Wasendorf Sr., “used
customer funds for purposes other than those intended by its customers, and
consequently, have misappropriated these funds.” False reports on customer
funds were also filed with the CFTC, it said. “This is much messier than MF
Global because it appears there is fraud involved, based on the CFTC
complaint,” Sarachek said.

Foreclosures
are on the rise again in Las Vegas - (www.vegasinc.com)
After months of steady
decline, foreclosure activity picked up last month in Las Vegas. Las Vegas
moved from No. 15 to No. 13 on RealtyTrac's list of large metro areas with the
highest foreclosure rates. It’s not yet known if the June numbers signal a
trend. Stricter paperwork requirements have made it harder for banks to
foreclose on homes in Nevada, and local real estate agents are watching
foreclosure filings to see if banks move to repossess a bigger chunk of
backlogged homes. ''Lenders and servicers are slowly but surely catching up
with the backlog of delinquent loans that under normal circumstances would have
started the foreclosure process last year,'' RealtyTrac CEO Brandon Moore said
in a statement. ''The increases in foreclosure starts in the first half of the
year will likely translate into more short sales and bank repossessions in the
second half of the year and into next year.''

Disaster Declared in 26 U.S. States as Drought Sears Midwest
- (www.bloomberg.com) More than 1,000 counties in
26 states are being named natural-disaster areas, the biggest such declaration
ever by the U.S. Department of Agriculture, as drought
grips the Midwest. The declaration makes
farmers and ranchers in 1,016 counties -- about a third of those in the entire
country -- eligible for low-interest loans to help them weather the drought,
wildfires and other disasters, Agriculture Secretary Tom Vilsack said today.
The USDA is also changing procedures to allow disaster claims to be processed
more quickly and reducing the penalty ranchers are assessed for allowing
livestock to graze on land set aside for conservation. “Agriculture remains a
bright spot in our nation’s economy,” Vilsack said. “We need to be cognizant of
the fact that drought and weather conditions have severely impacted farmers
around the country.” The declaration is effective as of tomorrow.

Italy stats office threatens to stop issuing data - (www.reuters.com)
Italy's
national statistics body ISTAT threatened on Thursday to cease issuing data on
the economy, saying it had been crippled by government spending cuts aimed at
reducing national debt and righting public finances. The euro zone's third
biggest economy, whose statistics are closely watched as the country's huge
state debts put it at the center of the bloc's financial crisis, would face
stiff European Union fines if the flow of data is cut off, ISTAT President
Enrico Giovannini was quoted as saying.

KRUGMAN:
The Government Has To Do More Deficit Spending To Avoid A Full-On Depression
- (www.businessinsider.com) In order to avoid a full-on
depression, the U.S. government needs to ignore the size of the deficit and
start spending to stimulate the economy, Nobel Prize-winning economist Paul
Krugman tells us. "Somebody has to spend more than their income, and, for
the time being, that has to be the government," says Krugman. But what
about the deficit, that so many people are concerned about? After all, Krugman
was something of a deficit hawk during the Bush administration. He notes two
things: One is that the deficit spending under Bush was totally wasteful, and
that that should have been time to pay down debts. But he also says he's
learned from watching the US and Japan that it's much harder for a country to
have a debt crisis than he previously appreciated.

Thursday, July 26, 2012

Current debt crisis is merely a warm-up act - (www.ft.com) It is sometimes possible to believe that
suffering is worthwhile, a way of paying for past sins. In this light, the age
of austerity in which we supposedly live has a sort of redemptive quality. Grit
our teeth and we’ll come out the other side, purified and ready for robust
economic recovery. However, after five years, we are in a worse place than when
we started. One would have thought that the recent deleveraging caused debt
ratios to collapse. Yet, after the financial maelstrom of the past five years,
debt ballooned to a weighted average of 417 per cent of gross domestic product
from 381 per cent in June 2007 in the 11 economies most under the market
microscope. Strikingly, in each of Canada, Germany, Greece, France, Ireland,
Italy, Japan, Spain, Portugal, the UK and the US, the ratio of total (public
and private) debt to gross domestic product is now higher than it was in 2007….
First, as deleveraging has not even started yet, the crisis of the world
economy has not begun either. All the perceived unpleasantness of the past few
years is merely a warm-up act for the greater crisis still to come. The need to
get debt levels down is as pronounced as ever in the eurozone, particularly
in southern Europe, but also in the US and Japan.

Iowa broker PFGBest collapses after hiding millions - (www.reuters.com) The U.S. futures industry reeled on Tuesday as
Iowa-based broker PFGBest collapsed after regulators accused it of
misappropriating customer funds for more than two years, dealing a new blow to
trader trust just months after MF Global's demise. The Commodity Futures
Trading Commission (CFTC), which along with industry regulators had given a
clean bill of health to dozens of brokers following spot checks in January,
alleged that the firm's regulated Peregrine Financial Group (PFG) unit and its
owner had defrauded customers and lied to regulators in order to hide a
shortfall that now exceeds $200 million. "The whereabouts of the funds is
currently unknown," the CFTC said in a complaint against PFG and its
founder and chairman, Russell R. Wasendorf Sr., whose suicide attempt on Monday
morning outside the firm's Cedar Falls, Iowa, offices appears to have
precipitated the crisis.

San Bernardino seeks bankruptcy protection - (www.latimes.com) San Bernardino, facing the
possibility of missing payroll, becomes California's third city in weeks to
authorize a bankruptcy filing. San Bernardino on Tuesday became the third
California city in less than a month to seek bankruptcy protection, with
officials saying the financial situation had become so dire that it could not
cover payroll through the summer. The unexpected vote came at the suggestion of
the interim city manager, who said the city faces a $46-million deficit and
depleted coffers. "We have an immediate cash flow issue," Andrea
Miller told the mayor and seven-member City Council. Mayor Patrick Morris
called the decision, passed on a 4-2 vote, a "stain" on the city. But
he said the only other option was "draconian cuts" to all city
services, including the police and fire departments. "It means the bills
will be paid," said a dejected Morris, who is not a voting member of the
council.

Pension deficits deepen in corporate Britain and U.S. - (www.reuters.com) Chronically weak stock
markets and record low bond yields have pushed company pension deficits in the
United States and Britain sharply higher, adding to the burden of retirees
living longer than ever before, reports said on Tuesday. In the United States
the aggregate deficit of S&P 1500 companies grew $59 billion in the first
half of the year to $543 billion, consultancy Mercer said. Corporate America is
sitting on total liabilities of $2.09 trillion against total assets of $1.55
trillion, Mercer added. The picture is no less bleak in Britain, where the
combined deficit of FTSE 100 companies more than doubled over the past year to
41 billion pounds ($64 billion), actuarial firm Lane, Clark & Peacock (LCP)
said in a separate report.

Italy faces another year of recession as capital drains - (www.washingtonpost.com) Italy will be stuck in
recession for at least another year and is facing some of the same developing
problems that have pushed other European countries to request outside aid, the
International Monetary Fund reported Tuesday in its latest review of
the country’s economy. The fund painted a muddled picture of the euro zone’s
third-largest economy. The government is enacting major changes to improve
growth and is getting public deficits under control. Yet investors are pulling
money from the country, banks are at risk from rising numbers of bad loans and
the economy continues to contract.

Wednesday, July 25, 2012

Crop
Insurance Set to Expand Despite Growing Fraud Worries - CNBC
- (www.cnbc.com) Farming can be a tough
business. The work is hard, the hours are long, and the profits unpredictable
at best. But
Robert Warren had a secret weapon: crop insurance. It helped make the man who
describes himself as “just a dumb farmer” into a multi-millionaire, with
properties in North Carolina, South Carolina and Tennessee. It turned out that
Warren made his millions by abusing the taxpayer-backed federal crop insurance
program for years, collecting more than $9 million in bogus claims. He pleaded
guilty to two conspiracy counts in 2005 after authorities found he had directed
his workers to scatter ice cubes and mothballs in one of his tomato fields in
Cocke County, Tenn., then sent in the pictures to show his plants were damaged
by a “hailstorm.” That claim alone netted Warren more than $80,000, according
to court documents. Warren’s wife, two employees, an insurance agent and a
claims adjuster also pleaded guilty. “The defendants’ involvement with the
(crop insurance) program was conceived and born in fraud,” wrote Assistant
United States Attorney Richard Lee Edwards in Warren’s 2005 sentencing
memorandum. “(T)hese defendants simply sat around the kitchen table and created
the production history figures which they submitted to the insurance company
and the USDA.”

FHA
mortgage delinquencies skyrocket more than 25% - (www.ochousingnews.com) The mortgage market appears
to finally be stabilizing — as long as you ignore loans backed by the Federal
Housing Administration. Increasingly, FHA-insured loans are falling into
foreclosure or serious delinquency, moving in the opposite direction of loans
guaranteed by Fannie Mae and Freddie Mac or those held by banks, which are all
showing signs of improvement. Does anyone really believe bank-held mortgages
delinquency rates are down 39%? Based on the charts of shadow inventory, the
number of 90-day delinquent loans hasn’t declined much at all over the last
year. We know the banks have not been foreclosing in earnest, and they have
billions in non-performing HELOCs and second mortgages on their books. I don’t
see how they could have reduced their delinquency rates that much. Perhaps the
include the loan modifications which temporarily cure the loans. And taxpayers could ultimately be on the hook
for FHA’s growing number of troubled mortgages. The agency’s finances are
already on shaky ground, and additional losses from loans going sour could
prompt the need for a federal bailout, experts said. “We can’t escape this
one,” said Joseph Gyourko, a real estate professor at the University of
Pennsylvania’s Wharton School. “This is an arm of the U.S. government.” The
share of government-guaranteed loans, a majority of which are backed by FHA,
that were 90 days or more delinquent soared nearly 27% during the year ending
March 31. Foreclosures jumped nearly 17%, according to a report published
recently by federal regulators.

Spain borrowing rate hits bailout danger zone of 7 pct - (www.washingtonpost.com) Spain’s struggling banks and
the country’s punishing borrowing costs will be the main subject of discussions
at this week’s meetings in Brussels of Europe’s finance ministers. Representatives
from the 17 countries that use the euro are to meet later on Monday to discuss
the terms of a €100 billion ($124 billion) lifeline from other members of the
17-country eurozone for Spain’s banking industry. The discussions are all the
more pressing as Spain’s borrowing costs rose to dangerously high levels
Monday. The interest rate, or yield, on the country’s 10-year bonds hit 7
percent, a level that market-watchers consider is unaffordable for a country to
raise money on the bond markets in the long term and the point at which Greece,
Ireland and Portugal all sought an international bailout. Stocks on Madrid’s
benchmark share index fell 0.7 percent.

In Lost Opportunity of 1932, Are There Lessons for Today? -
(www.nytimes.com) By the summer of 1932, the
Great Depression was three years old with no end in sight. The Hoover
administration, like Republicans today, was adamant that economic stimulus was
wrongheaded, that the big problem was business confidence, which would be
restored by keeping the budget under control, and that under no circumstances
should the Federal Reserve adopt policies that would ignite inflation. However, it was painfully clear to farmers and
business people that deflation – falling prices – was the root of the economy’s
problem. Between 1929 and 1932, the consumer price index fell 20 percent and
prices for many commodities had fallen much more. As a consequence, producers
could not make a profit, which led them to lay off workers. As workers lost
income, they reduced their purchases, which intensified the downward pressure
on prices. By early 1932, a growing number of prominent economists were openly
advocating “reflation” – just enough inflation to get the price level back to
where it was in 1929.

Tuesday, July 24, 2012

SCRANTON
RUNS OUT OF MONEY, Cuts All City Salaries To Minimum Wage - (www.businessinsider.com) Scranton, Pennsylvania's, the
state's sixth-most-populous city (population of 76,089 in 2010 census), is down
to its last $5,000 and has no way to pay salaries. The mayor wants an immediate
tax hike of 29% and 78% over three years. In every sense of the word, Scranton
is bankrupt. NPR reports Scranton's Public Workers Now
Paid Minimum Wage. The city of Scranton, Pa., sent out paychecks to
its employees Friday, like it does every two weeks. But this time the checks
were much smaller than usual. Mayor Chris Doherty has reduced everyone's pay —
including his own — to the state's minimum wage: $7.25 an hour. Doherty says
his city has run out of money.

MBIA Drops as Regulator Balks on Note Payment: New York Mover
- (www.bloomberg.com) MBIA Inc. fell the most in 11
months after the bond insurer said a regulator hasn’t decided whether to allow
a unit that backed soured mortgage debt to make an interest payment on notes. The
insurer dropped as much as 12 percent to $9.35 before climbing back to
$9.48 as of 10:39 a.m. in New York. The shares have declined 18 percent this
year. Payments on the 14 percent surplus notes maturing in 2033 are scheduled
for July 16, MBIA said today in a regulatory filing. No cash is due from
the company’s MBIA Insurance Corp. unit if the New York State Department of
Financial Services doesn’t approve of the step, the Armonk, New York-based insurer
said. Kevin Brown, an MBIA spokesman, declined to comment further.

Libor Woes Threaten to Turn Companies Off Syndicated Loans -
(www.bloomberg.com) The scandal surrounding the London interbank
offered rate is threatening to undermine confidence in syndicated loans and
hasten companies’ flight to bonds. “What corporate treasurers are concerned
about is the damage this Libor problem will do to market confidence,” said John
Grout, the policy and technical director at the Association of Corporate
Treasurers in London, which has about 4,500 members. “If people lose trust in
banks and Libor, which is indexed to a huge amount of debt and derivatives
instruments, market liquidity could be reduced and borrowing costs could rise
for corporates.” Corporate loans typically pay interest pegged to Libor or its
equivalents in other currencies, and the rate-rigging scandal is spreading
uncertainty about whether the benchmarks reflect lenders’ true cost of funding.
At least a dozen banks are being investigated for manipulating Libor, prompting Barclays Plc (BARC) Chief Executive
Officer Robert Diamond to quit last week after
the U.K.’s second-biggest lender was fined a record $451 million.

Investment Bankers Face Termination As Europe Fees Fall - (www.bloomberg.com) Investment bankers in Europe are
girding for a second wave of job cuts in less than a year after the euro area’s
debt crisis drove fees from mergers and securities underwriting to a nine-year
low. Credit Suisse Group AG and UBS AG, Switzerland’s biggest
lenders, face the most pressure to boost efficiency as that country runs ahead
of others in introducing tougher capital and liquidity rules to curtail
risk-taking, making some businesses unviable. The banks’ securities units had
the highest costs as a proportion of revenue among a group of the 12 largest
firms in Europe and the U.S. last year, Morgan Stanley analysts Hubert Lam and
Huw van Steenis wrote in a May 24 note. While the situation may be most acute
at Credit Suisse and UBS, similar dynamics are at work at other firms as the
debt crisis drags on, capital requirements ratchet higher and economic growth
grinds to a halt.

CHANOS:
China's Credit Situation Is Worse Than Greece And Spain - (www.businessinsider.com) In an interview with Opalesque TV, Jim Chanos gave his thoughts on short
selling and also added his outlook on the China macro and micro situation. Chanos
sees many short opportunities in Chinese companies for a number of reasons,
including a terrible credit situation. Below are some of the transcribed quotes
from his interview, with the video embedded at the bottom of the page. On
China: "A lot of people get the wrong impression, we are not macro
people and I've stressed that we are stock people. But we came at China for
exactly that reason. In the summer of 2009 we were looking at mining stocks,
and we were trying to figure out why it was that in the teeth of a global
recession, in mid-'09, that mining companies were reporting pretty close to record
profits."

Monday, July 23, 2012

Commercial Mortgages Show How Bad It Got - (www.nytimes.com) Just five years ago, the
commercial real estate market was thriving. The delinquency rate on mortgage
loans was at a record low, and the volume of new mortgages being sold to
investors was at a record high. Now the first of the mortgages that were
securitized in 2007 have started to come due, and it is becoming clear just how
bad many of the loans were. The time when investors were most eager to buy
turns out to have been the worst time to do so. Commercial mortgages — unlike
residential ones — are seldom issued for periods of longer than 10 years, and
often for as little as five. Many require no principal repayments during that
period but call for the entire amount to be repaid in a balloon payment at the
end of the loan. So it can be at maturity when the bad news arrives. “Only 28
percent of the loans from 2007 due to mature in 2012 managed to pay off in
full,” said Manus Clancy, the senior managing director at Trepp L.L.C., which
monitors the commercial mortgage market.

A VIP
mortgage program run by now-defunct Countrywide Financial Corp was used to
influence lawmakers with the aim of killing legislation that could hurt the
company's profits, a congressional report released on Thursday said. The report
from the House of Representatives' Oversight and Government Reform Committee
provided new details about the program, which offered discount loans to
"VIPs," and it named dozens of congressional staffers that benefited.
The company, which was once the biggest U.S. mortgage lender, granted hundreds
of loans between 1991 and 2008 through the VIP program, the report said.

Spain Crisis Forces $7B in Cuts on Hospitals - (www.bloomberg.com) For some cancer patients,
Spain’s debt crisis means living on borrowed medicine. Virgen de la Luz
hospital in the rural province of Cuenca turned away two women with lung and
breast cancer in May after Roche Holding AG (ROG) stopped
supplying tumor fighter Herceptin, according to documents obtained by Bloomberg
News. The women got the drug after a 24-hour wait thanks to a hastily-brokered
deal to borrow it from another clinic. To rescue Cuenca and the rest of Spain’s
health system, which sank into debt alongside the regional governments that
operate it, the state arranged an infusion of guaranteed loans and demanded 7
billion euros ($8.8 billion) in cost cuts. Yet doctors and patients warn the
prescription for cutbacks may cause more pain than the budgetary malaise it was
meant to cure.

Dynegy Inc files for bankruptcy; will merge with unit - (www.reuters.com) Power producer Dynegy Inc (DYN.N), the parent company of Dynegy
Holdings, filed for bankruptcy protection on Friday morning as part of its
settlement agreement with creditors and said it will merge with its unit. Last
month, a bankruptcy court approved the company's settlement with creditors
under which Dynegy and Dynegy Holdings would be combined, with creditors
holding a 99 percent equity stake in the combined company. The settlement
resolved a dispute among creditors over whether Dynegy had acted properly last
September in taking $1.25 billion of coal-powered plant assets from Dynegy
Holdings.

Why Central Bankers Can't Arrest Slowdown - (www.cnbc.com) The rate cuts from three major economies on
Thursday may have dominated headlines, but it did little to inspire confidence
in global stock markets, which fell as investors took the move to mean the
world economy remains in trouble. For many market
watchers, it’s becoming apparent that there’s little global policymakers can do
to arrest what some describe as a global “synchronized slowdown.” The European
Central Bank and the People’s Bank of China both
slashed interest rates, the former to a record low, amid signs that
economies in these regions are still weakening. The Bank of England, whose
rates are already at an all-time low 0.5 percent, said it would buy 50 billion
pounds ($78 billion) of assets with newly printed money to help the economy out
of recession.